Puerto Rico Over­sight Board Fi­nally Start­ing to Fo­cus on Debt Re­struc­tur­ing

Trillions - - In This Issue -

Puerto Rico's un­payable and crush­ing debt may fi­nally get some ad­just­ment.

The Puerto Rico Over­sight, Man­age­ment and Eco­nomic Sta­bil­ity Act passed back in June by the U.S. Congress cre­ated the Fi­nan­cial Over­sight and Man­age­ment Board of Puerto Rico to re­solve the debt cri­sis.

Af­ter months of in­ac­tion, the board re­cently sent a let­ter to cur­rent Governor Ale­jan­dro Gar­cía Padilla and in­com­ing Governor Ri­cardo Ros­sello stat­ing ar­eas for fis­cal plan re­view and that debt re­struc­tur­ing talks are fi­nally mov­ing for­ward.

Puerto Rico has over $70 bil­lion in debt thanks to decades of ex­treme cor­rup­tion, mis­man­age­ment in San Juan and Wash­ing­ton DC, preda­tory lenders, lack of democ­racy and a de­clin­ing pop­u­la­tion. Much of the debt cri­sis was cre­ated by men in po­si­tions of power to en­rich them­selves and their com­pa­tri­ots.

The Act is sup­posed to stop preda­tory ac­tions by cred­i­tors and pri­or­i­tize the pay­ment of pen­sions and so­cial ser­vices ahead of debt pay­ments. It is sup­posed to re­duce child poverty on the is­land and pro­vide strong bank­ruptcy tools to re­turn the debt to sus­tain­able lev­els. The Act tem­po­rar­ily pre­vents debt col­lec­tion law­suits against the heav­ily in­debted is­land, how­ever, un­less a for­mal debt re­struc­tur­ing process moves for­ward by Fe­bru­ary, the mora­to­rium on law­suits will ex­pire.

One of the prob­lems is that some of the con­trol board's mem­bers are some of the same peo­ple who helped cre­ate the cri­sis.

Puerto Rico's debt be­came un­sus­tain­able in the last 10 years due to end­less bor­row­ing. Pub­lic debt grew from a sus­tain­able 63% of GNP in 2006 to just over 100% of GNP by 2015 thanks to U.S. in­vestors’ de­mand for the Com­mon­wealth’s tax-free mu­nic­i­pal bonds — pop­u­lar be­cause they are ex­empt from fed­eral, state, and lo­cal taxes and are con­sti­tu­tion­ally guar­an­teed by the Puerto Ri­can gov­ern­ment — and a cor­rupt gov­ern­ment en­cour­aged to just keep bor­row­ing with­out con­sid­er­ing the con­se­quences.

Bond bro­kers and fi­nan­cial in­sti­tu­tions were more than ea­ger to cash in on the lu­cra­tive fees that the bonds gen­er­ated for them.

It re­mains to be seen who, be­sides the Puerto Ri­can peo­ple, end up hold­ing the bag for Grand Theft Puerto Rico.

Photo by vxla.

La Perla neigh­bor­hood in Old San Juan out­side the walls of Castillo de San Cristóbal.

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